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does she "own" the home?


sgull's Avatar
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01-29-17, 12:42 PM   #1 (permalink)  
does she "own" the home?

I'm trying to help my mother-in-law fill out a will questionnaire from the lawyer who will be drawing up a will for her. My mother-in-law has a reverse mortgage (home equity conversion mortgage) on her home and one of the questions on the questionnaire is whether she owns her own house. All the money from which she received from the reverse mortgage loan has spent long ago (photo below is of various amounts included on her latest monthly mortgage statement). I suppose, since apparently because there needs to be so much repayment to the reverse mortgage company upon (or at least soon upon) her eventual demise, the answer to the question of whether she owns her own home might be “no”. Or does she in fact still actually “own” the house, until her demise, even though apparently there is no “equity”?? Any comments appreciated.


 
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01-29-17, 01:36 PM   #2 (permalink)  
She owns her home just as much as I do. I have standard mortgage on my home, but main difference is I have equity in my home while she has none. It would be the same as somebody buying a house but have yet to make a payment. They still are the owners of the house even though the bank holds the loan.

This is my opinion BTW.


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01-29-17, 01:59 PM   #3 (permalink)  
I agree, the Reverse Mortgage Company really "owns" the home, but for purposes of living in an owned home or renting, she "owns".

 
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01-29-17, 02:14 PM   #4 (permalink)  
I agree with everyone here; it all depends upon who is asking the question and the purposes to which the answer is going to be put.

For the benefit of the potential Heirs reading the Will; they should know in advance that there's nothing left for them to inherit here . . . . except maybe some of that Service Fee !

For the review by Medicaid, when they're trying to get a recipient to spend down and dispose of all of their assets . . . . she's already done that with this property.

I'll bet the Lender's Underwriters thought this would be a more profitable venture than it turns out to be for them . . . . good luck to her; and may her days be long in the property that continues to serve as collateral for that Mortgage.

Did they overshoot the "Service Fee set aside" by 50%; such that she now has a negative "Line of Credit" available . . . . I don't think that's supposed to happen !

 
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01-29-17, 02:19 PM   #5 (permalink)  
Ok thanks for those replies. Further on in the questionnaire, it asks to "Please list/identify any other types of property/debts do you own/owe" and gives a listing of examples, one of which stands out to me as perhaps being applicable as it may pertain/relate to her reverse mortgage. That is "Real Estate Mortgages." Should she probably figure she should include her reverse mortgage a debt that she owns (or perhaps otherwise owes?) as property in that "Real Estate Mortage" example? And if so, how much would that debt be? $235,660.07? (The Outstanding Principle Balance as shown on the statement in the photo my first post here). Again, any comments appreciated.


 
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01-29-17, 04:40 PM   #6 (permalink)  
Now I think I'd have to defer to your Arkansas Attorney. I suspect that Questionnaire was devised before they had to take the concept of Reverse Mortgages into consideration.

 
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01-29-17, 08:28 PM   #7 (permalink)  
An additional item in the questionnaire (shown below) asks to add all assets (including any home equity) and subtract debt/liabilities in order to establish an amount of net worth, and an estimated net worth at death. If she owns no equity in the home (which is the case now, right?), and will apparently owe a debt to the reverse mortgage company for the outstanding principle balance of $235,660.07 upon her demise, should that amount most certainly be included within the Total of Debt entry and so also most certainly then figured in the estimated net worth at death?


 
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02-19-17, 03:42 AM   #8 (permalink)  
Short answer, Yes.

Technically, the "full name" of a "mortgage" document per se is "mortgage deed." The full name of what most of us refer to as a "mortgage" is "mortgage loan." When you "get a mortgage" you actually deed the property over to the bank or finance company but they have no right to use the property or evict you until after they foreclose as a result of your not fulfilling the terms and conditions of the loan.

Your mother in law (and most of us homeownsers) have a loan secured by a mortgage. So your MIL has a "reverse mortgage" whose current balance is greater than the value of her house. Her net worth would be no different compared with having no mortgage on her home and a personal loan with the same balance greater than the value of her home. By holding the mortgage, the bank can more quickly take the home if the terms of the underlying loan are not fulfilled (the bank can foreclose). But the bank that gave you a personal loan can sometimes attach a home and take the home also.

Surprise! If you owe someone or some company money and don't pay, there are some situations where they could attach your home -- and foreclose. This is not always useful because, for example, if the second mortgage holder forecloses, the first mortgage still has to be paid off and there might not be enough value in the house to pay off both the first mortgage loan and the second.

Assets owned by the bank include the loan notes (one accompanies every mortgage) and not the underlying real estate. A loan note may or may not be valued at unpaid balance depending on whether payments are up to date and/or the value of property securing the note.


Last edited by AllanJ; 02-19-17 at 04:06 AM.
 
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02-19-17, 08:16 AM   #9 (permalink)  
Short answer, Yes.
Short reply, Thanks AllenJ !

 
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